Sale and Leaseback On The Champs Elysees

29th Jul 2003

London - Jones Lang LaSalle Hotels, acting on behalf of Strategic Hotel Capital (SHC) have sold the Freehold of the Paris Marriott Hotel on the Champs Elysées to Deutsche Immobilien Fonds AG (DIFA), Hamburg. Strategic Hotel Capital (SHC) retain the leasehold interest (fonds de commerce) which is subject to a long-term management agreement with Marriott International.

DIFA said that it sees the Paris Marriott as a very important asset in their real estate portfolio, which includes offices, retail and hotel properties throughout European countries and the US. DIFA`s acquisition goes to support the increasingly widespread recognition of hotels as a mainstream investment asset class.

Strategic Hotel Capital`s Tanya Geller said, “We are delighted to conclude this ground breaking deal with DIFA. The concept of the deal was to create a partnership that met the requirements of both parties and capitalized on their strengths. The combination of DIFA`s expertise in real estate ownership and Strategic`s experience in hotel asset management is a powerful combination. The lease positively encourages a close partnership between DIFA and SHC in ensuring that the Paris Marriott remains one of the best performing Marriott hotels in Europe.”

“The investment in the Marriott Champs-Elysees adds a further top-class hotel to the portfolio of the DIFA-GRUND open-ended real estate fund, bringing the total number of hotels owned by DIFA to 18. Working with experienced investment companies such as SHC helps us expand our own expertise in the hotel segment and opens up exciting opportunities for acquiring other city centre business hotels in the attractive four to five-star category,” says Dr. Reinhard Kutscher, the DIFA Management Board member responsible for business outside Germany. “In addition, joining forces with a third party allows real estate funds to enter into management agreements with hotel operators. Previously not an option, this arrangement helps safeguard returns”

Commenting on the deal, Arthur de Haast, Global CEO of Jones Lang LaSalle Hotels said “The Paris Marriott has been a success story for us from the start. We originally sold the property to Strategic Hotel Capital back in 1998. We then advised Barclays Bank on SHC`s refinancing of the property in 2001 and we were delighted to have worked with Goldman Sachs as advisors on this ground breaking, innovative and complex hotel real estate transaction. The key to the transaction was the structure. This had to meet DIFA`s requirement for investment quality income, with the prospect of some upside potential through a profit sharing mechanism, while at the same time providing for sufficient operating flexibility for SHC.

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He concluded, “It also demonstrates our Global and Pan-European capabilities and in particular the strengths of our local contacts. It was our past dealings with both parties which allowed us to bring them together, to mediate on the nuances of the deal in a multicultural environment, and to communicate the terms of the deal to no less than four different teams of lawyers.”

SHC`s lawyers were led by Andrew Armfelt of Moquet-Borde in Paris and Philip Gordon of Perkins Core in Chicago.

DIFA were advised by Ma”tre Pierre Popesco of Lefèvre Pelletier in Paris and Jürgen Hübner of Latham & Watkins Schön Nolte in Hamburg.

Jones Lang LaSalle Hotels is the world`s leading hotel investment services group. Through its 18 dedicated offices and the Jones Lang LaSalle network of over 7,000 professionals in more than 100 key markets, Jones Lang LaSalle Hotels is able to provide clients with value added investment opportunities and advice.

Jones Lang LaSalle Hotels recent track record for the last two years included the sale of 13,994 hotel rooms to the value of US$1.4 billion in 48 cities and advisory expertise for 173,021 rooms valued at US$32.6 billion
across 343 cities.